Chrysler may cut more dealers in credit crunch

Chrysler Group may have to cut another 145 dealers unless they can find a new source of financing. That’s because the dealers have been unable to qualify for financing from GMAC, Chrysler’s primary financing source.

The dealers have been caught in the in the transition from Chrysler Financial to GMAC. They have existing mortgages and floorplan debts through Chrysler Financial which refuses to give up its rights to first call on assets. In addition, much of the mortgaged real estate is now worth less than the mortgages. Chrysler Financial is no longer offering floorplan financing for Chrysler products.

Dealers had until the middle of this month to qualify for GMAC funding or obtain ongoing financing from another source.

Chrysler to improve dealer experience

CEO Pietro Gorlier. Mopar continues to look into other channels including wholesale retail, independent repair shops, and collision parts with a price matching program. Mopar has been adding techs and service advisors, and developing an “express lane” system for immediate service on their car, as well as adding a market-driven smart pricing program. Accessories are now being designed during vehicle development, engineered to ease installation, with availability at vehicle launch. The goal is for 80% of dealers to have weekend and extended hours for service. A new wiTech (wireless) diagnostic system is being added, with new wiring diagram applications (the first dynamic wiring information system, a design driven by technicians and using vehicle-specific on-demand information). The parts network reorganization should save 13% of trips. A wave of actions started in June 2009 to improve parts distribution logistics.

In 2009 they plan to fix the basics; in 2010 to  target industry benchmarks, enforce dealer standards; and by 2012, to become best-practice so customers view the service organization as an asset.

Quality of customer care drivers: brand-customer interface (product, customer care center); dealer-customer interface (sales, service, parts/accessory experiences). Rigorous key performance indicator process needed to drive success, excellence can only be achieved when everything exceeds customer expectations. There must be proactive customer support and a closed-loop approach with follow through. (This echoes the old Five Star program as it was originally designed.)

A single U.S. toll free number will be created for each brand, Chrysler, Dodge, Jeep, and Ram, to customize the owner experience – 800 CHRYSLER, 877-I-AM_Jeep, 800-4aDodge, and 877-RAM-5720.

Fiat 500 to be a dealer draw

A North American version of the Fiat 500 is expected to increase foot traffic and new customers. It will mainly be sold in key metro areas with specific interior showroom branded salons, and a high degree of customization through accessories. The 500 will have dedicated sales and service staff.

Dealer network productivity is to be increased, with redefined dealer standards. Chrysler went from 21% of dealers to 12% in the US, losing 2,831 dealers in the last 19 years. Project Genesis is continuing as planned, to increase franchise attractiveness, profits, and throughput, providing a sound base for reinvestment. Full implementation is due for 2011. At the moment, Chrysler has around 440 sales per dealer in metro areas; the goal is for them to go up over 700. Tight credit is a serious problem especially for dealers — and Chrysler dealers tend to sell fewer cars per month than competitors. New dealer financing will replace Chrysler Financial by December.

Just 36% of dealers have a return on sales greater than 1.5%; they expect this to increase to 60% by 2014. Dealer support is being expanded to include financial skills. Planned growth of commercial vehicle sales will require overcoming strong competition and changing service hours to meet business owners’ needs. In general, dealers need to overcome problems of high land cost, and customer convenience (old or suboptimal locations).

A green facility initiative is planned to both increase environmental friendliness, and to cut costs.

Since June 10, dealers have committed over $250 million in capital investment, with 20 new buildings, 200 major renovations.

Mopar Online Store clarified

Mopar has clarified its eStore announcement in a mailing to dealers. Parts ordered online by end users will be sent to local dealers for fulfillment, using existing dealer-to-dealer systems, as speculated earlier. Payment will be made using existing invoicing systems. Dealer participation in the “D2D Customer” program is optional.

At the dealer, once an order is routed from the eStore, a parts person will accept the order and ship it out; Mopar handles the customer interface and payment system.

Direct orders from Mopar coming (clarified)

Beginning next month, consumers may log on to the Mopar eStore at www.mopar.com and purchase any of the more than 100,000 parts and accessories available for a variety of Chrysler, Dodge, Jeep and Plymouth vehicles.  Mopar will ship parts anywhere in the U.S., including Alaska and Hawaii.

One of our readers wrote: “It looks similar to MOPAR’S Dealer 2 Dealer referral system.  D2D, as we call it is used by MOPAR to fill orders of backordered parts by purchasing  them from dealers that have paid for the D2D service. It is also a good way to utilize  obsolete inventory that otherwise might have been thrown away and written off.

“The system will work like this: The customer looks up and orders part from MOPAR website, MOPAR in turn  finds a dealer with stock of that given part number. The dealer then sells the part to MOPAR and ships it to the customer, MOPAR pays for freight too. With the D2D program MOPAR reimburses the dealer for the cost of the part, if the part number is obsolete or discontinued, if the part is on backorder, (MOPAR is out of stock) they will reimburse the supplying dealership 110%, or cost + 10% which is generally what dealers in a given geographic area will sell to one another.”

40 Chrysler dealerships at risk over financing flap

The National Automobile Dealers Association says as many as 40 Chrysler dealerships may be threatened with foreclosure because of the ongoing dispute between GMAC and Chrysler financial.

“The parties have taken inconsistent positions and dealers are stuck in the middle,” said Forrest McConnell, an official with NADA. The dealer group says the affected dealerships are viable but may be unable to get floorplan financing since the two finance houses can’t agree on their status as creditors. GMAC assumed the role of captive finance source for Chrysler Group dealers when the automaker came out of bankruptcy. The U.S> government ordered the change because GMAC, due to its status as a bank, had better access to capital than Chrysler Financial, which is owned by Cerberus Capital Management.

The problem is the dealers have existing floorplan loans and mortgages with Chrysler FInancial and have only until the middle of next month to get set up with GMAC for new financing. Without the floorplan loans, dealers will not be able to order fresh inventory. GMAC is asking for more collateral, saying the value of the vehicles isn’t enough, and Chrysler Financial refuses to give up its position as the creditor with first demands on assets.

In better times the dealers might have been able to borrow against the value of their property or get other financing from commercial banks. However, plunging real estate values have left some dealers owing more than their property is worth and, as one dealer noted, “…(T)here’s not a bank on the planet that will loan a dime to any Chrysler or GM dealer.”

2010 Heavy-Duty Rams now shipping

The first 2010 Dodge Ram 2500 and 3500 pickups are on their way to dealers. Production began last week in Saltillo, Mexico and the trucks should be on dealer lots within three weeks.

The big Rams are the first new products that will be coming from Chrysler for the 2010 model year. New vehicle development came to a halt while Chrysler was owned by Cerberus Capital Management as the financial holding company desperately sought to cut costs over the past year.

The new pickup incorporates many of the changes that appeared on the 2009 Dodge Ram 1500 pickup. A new crew cab is available, giving Dodge an entry into a body style that accounts for nearly half of all heavy-duty pickup sales. In addition, there’s a significantly upgraded interior, increased towing capacity and a smoother ride that uses a hydraulic spring at the rear of the cab to reduce bouncing. Buyers can select a 383-horsepower 5.7-liter HEMI or a 6.7-liter, 350-horsepower Cummins Turbo Diesel engine with 650 pounds-feet of torque.

The big Ram pickups recently received the “Heavy Duty Pickup of Texas” award from the Texas Auto Writers Association.